The real work is about to begin for Knicks general manager Glen Grunwald.

Free agency starts at 12:01 a.m. Sunday, and with seven players under contract and Thursday night's second-round pick, Kostas Papanikolaou, stashed in Greece for another year, Grunwald has plenty of roster spots to fill, particularly in the backcourt.

"The guard position is something obviously where we have to address," Grunwald said. "That's where the holes are right now."

The Knicks feel comfortable up front with Carmelo Anthony, Amar'e Stoudemire and Tyson Chandler. They believe that trio together for a full training camp and with coach Mike Woodson will lead to a better finish than another loss in the first round of the playoffs. But work needs to be done on the perimeter.

As expected, the NBA and players' union reached a settlement on the arbitration proceedings that granted Jeremy Lin and Steve Novak "early Bird" rights this free agency. The NBA dropped the appeal and Lin and Novak maintain their rights, giving the Knicks more flexibility because they can re-sign them without using any exceptions.

All signs point to the Knicks re-signing the restricted Lin -- Grunwald hopes to lock him up before he gets an offer they have to match -- and J.R. Smith. That will take care of some of those backcourt holes, but it's just the beginning.

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Knee surgery could sideline Iman Shumpert until January, so the Knicks need another shooting guard. They also would like to sign someone who can lead an offense and mentor Lin.

"We're looking for experienced players in general," Grunwald said. "We're at the stage where we want to make improvements right away and take steps forward to additional success."

Landry Fields is a restricted free agent whom the Knicks would bring back at the right price. Novak is unrestricted; the Knicks want him back but probably won't overspend because it could hamper other moves they make.

Paying Lin, Novak, Smith and Fields probably would make the Knicks a luxury tax-paying team and limit them to having the new $3-million mini-midlevel exception instead of the full $5-million midlevel.

That likely won't be enough to sign Nash -- who can get more from Toronto, Phoenix and Dallas -- or some other established veterans. So the Knicks will try to find creative ways to have the full midlevel without being hamstrung to make other moves.

"That's one of the various scenarios, that we could use the full non-taxpayer midlevel," Grunwald said. "It's possible."

If the Knicks only have the mini-midlevel, they hope that New York will be enough to lure players.

"I know people like to play in New York," Grunwald said. "I think we have a good team. I think we've got a chance to do something in the playoffs."

The Knicks will have heavy competition for Nash, Kidd and Allen. Felton, Terry, Miller and Foye could be more realistic options. O.J. Mayo has been linked to the Knicks but likely will be too expensive.

Notes & quotes: Toney Douglas, Josh Harrellson, Jerome Jordan and J.R. Smith's brother Chris are among the players expected to be on the Knicks' summer league team that will play in Las Vegas next month.